April 2015

04/30/2015

The U.S. House of Representatives this week passed a bill to provide gift tax certainty to individuals who make gifts to 501(c)(4) social welfare organizations, 501(c)(5) labor unions, and 501(c)(6) trade associations. In a related move, the House also passed a bill to repeal the federal estate tax (H.R. 1105, the “Death Tax Repeal Act”).

Recently, the House of Representatives passed, with broad bipartisan support, the Fair Treatment for All Gifts Act and the Death Tax Repeal Act as reported by The National Law Review in an article titled "Gift Tax Certainty at Last? re: H.R. 1104."

Lawmakers have grown increasingly wary about how the gift and estate taxes operate to cause strain on estates of farmers, small business owners and others. This is especially a concern given President Obama's new proposals for an increased capital gains tax and for eliminating the step-up basis for capital gains on death.

The gift tax act would exempt from the gift tax any gifts to social welfare organizations, trade associations and labor unions. This is an extension of the IRS policy that already exempts gifts to social welfare organizations.

The Death Tax Repeal Act will do just what it says.

Of course, neither act is currently law. They both must still pass the Senate and avoid a Presidential veto. However, this is the first step to making these acts law.

04/29/2015

A Brooklyn woman scammed $300,000 from her friends by telling them she had inherited a boatload of cash but needed their dough to pay off the estate’s taxes and liens, prosecutors said Tuesday.

Have you heard of the standard inheritance scam? A scammer pretends to be an attorney or estate agent. They tell a potential victim that the victim has inherited a large fortune from an estranged or long lost relative. However, before the victim can get the inheritance, the scammer claims that the victim must cough up large sums of money to pay off taxes or other debts that the estate holds.

Plot twist! A woman in Brooklyn is alleged to have turned this standard inheritance scam around.

She forged bank documents to make it look like she had received an inheritance for $13 million in cash. She then went to her friends and convinced some of them that to get the cash she needed money to pay the estate's taxes and debts.

04/28/2015

The United Jewish Appeal claims it was supposed to get the remainder of a trust set up by building mogul Bill Gottlieb, who died in 1999, according to a filing in Manhattan Surrogate’s Court. Gottlieb’s late sister’s husband, Irving Bender, eventually became the beneficiary of the trust, and ­allegedly blew $3.5 million meant for the charity.

In a lawsuit, United Jewish Appeal alleges that Irving Bender wasted $3.5 million of trust assets on fancy hotels and other luxuries that were well beyond his normal standard of living. It is also alleges that these expenditures were allowed by the third-party trustee so that it could get business in the future from one of Bender's relatives.

Under the terms of the trust, Bender was supposed to use trust assets during his lifetime but retain his normal and usual standard of living. The remainder of the trust was to go to United Jewish Appeal.

Of course, Bender disputes the allegations and it is too early to tell which of the parties is correct.

These types of suits are not unusual, however.

Trusts often have conflicts between present and future beneficiaries. The keys to creating a trust that does not have those types of conflicts is to set specific limits in the trust and to choose a trustee that does not have a business interest in taking one side of the conflict over the other.

An experienced estate planning attorney can help parties steer clear of these conflicts.

With the fate of the bill against the estate tax yet to be determined by the Senate and President, let’s reflect on the top ten reasons the death tax deserves to die.

Many people wonder why the estate tax would be repealed and why there is so much controversy surrounding the matter.

With the U.S. House of Representatives recently voting to repeal the estate tax, the issue now will go before the Senate for approval. If it passes there, then President Obama will need to decide whether to veto the legislation or not.

04/24/2015

What has been missing for so long is a means of transferring real estate in a simple, probate-free process. In about half the states, that hole has been plugged.

Probate can be messy, time-consuming and costly. Consequently, many people want to avoid it for their own estates.

Unfortunately, probate is unavoidable if you own real estate and have not done any estate planning.

If you have done estate planning, however, then there are three common ways to transfer real estate without probate.

Joint Tenancy - This is one of the most common ways that people seek to avoid probate. When someone is made a joint tenant of any real estate, that person automatically takes possession of the property after any other owners pass away. Most attorneys counsel against this, however, as the property can often be attached by any joint tenant's creditors.

Trusts - Trusts do not go through probate, making them an excellent way to transfer real estate. However, many people do not need a trust for anything else so the expense of getting one is not always worth it.

Transfer on Death Deed - As AZcentral points out in a recent article, titled "Probate-free real-estate deeds spread across U.S.," transfer on death deeds are another way to avoid having real estate pass through probate. However, they must be properly recorded during life to be effective upon death. Note: these deeds are only available in about half the states.

If you own real estate and would like to avoid probate upon postmortem transfer, then contact an experienced estate planning attorney to discuss these options and determine which is best for you.

04/23/2015

For the first time since the Apollo missions, there is serious talk of more manned spaceflight missions, and it is raising an important question: When someone dies in space, what do you do with the body?

As in life on Earth, the unknown can happen in space at any time. Right now if an astronaut passes away in space, his or her body can be transported back to Earth fairly soon. This is because humans only spend relatively short periods of time in space and that time is spent close to Earth.

But what about planned journeys to Mars? Not only do they take longer to get there, but there are plans to have humans living there permanently. Consequently, NASA must come up with a plan to deal with any astronaut deaths.

The simplest solution? Jettison a dead body into the vacuum of space. Kind of like burial at sea for sailors. However, that is prohibited by international agreement.

So, here is the proposed solution. If an astronaut dies while in route to Mars, NASA plans to put the body in a special bag that can be exposed to outer space. The body would freeze and be brought back into the spacecraft where it would be vibrated thereby causing the remains to be ground into a fine dust.

What happens to the “dust”? If someone dies while on Mars, NASA is discussing using the remains as compost for the crops settlers would grow.

Of course, human settlers on Mars would also have estate planning issues that need to be worked out, especially if they want to leave property on Mars to a relative living on Earth.

Needless to say, that is yet another difficult problem that NASA will need to work out.

Of course, given the law of supply and demand, these costs likely will continue to rise in the coming years.

Many people fail to take nursing home and other retirement costs into account when creating their estate plans. As a result, there may be little or no “estate” left when they pass away. In fact, there may even be debt.

In some cases, people who create their own gifting plans can later learn that they have given away money they actually needed to meet their later-in-life expenses, such as nursing home care.

This is another reason that you should always seek the help of a professional to create your estate plan. You need to make sure that your life and your estate are both planned for properly.

04/21/2015

For the first time in a decade, Congress has decided to seriously examine the burden the death tax — also known as the estate tax — places on grieving families and their small businesses and employees.

Present law states that if a business owner passes away his or her heirs possibly only have to pay one tax on the inheritance: the estate tax. After the American Taxpayer Relief Act of 2012, the estate tax exemption amount is a permanent $5 million as indexed annually for inflation. That makes the exemption $5.43 million per taxpayer in 2015.

However, under President Obama's budget proposal, those heirs might also have to pay capital gains on the amount that the inherited business has appreciated.

This has caused many family business owners and farmers to cry foul as reported by Roll Call in a recent article titled "Obama's Double Death Tax."

The biggest issue for business owners is that the double taxation makes it more likely that the business or portions of it will have to be sold to pay the taxes. Congress has acted on this problem and is now seriously considering repealing the estate tax to ease the burden on business owners.

While it is still too soon to know what will happen with these tax proposals, you should monitor their progress. Whatever the outcome, many estate plans will need to be adapted for the new laws.

04/20/2015

The dictionary defines beneficiary as "the recipient of funds" -- from a will, trust, retirement plan or life insurance. But that doesn't begin to cover the details and the differences. Here are five things you need to know.

The term “beneficiary” involves receiving assets from a wide variety of legal instruments, and many people get confused about the different types of beneficiaries out there.

A person can be a beneficiary of several different things, including a will, a trust or an insurance policy. Each legal instrument has its own rules that must be followed.

04/17/2015

If you can’t find the life insurance policy of a deceased relative, here’s your biggest problem: There’s no central, national database of life insurance policies. So if you’re hunting for a policy — and have had no luck finding the policy itself in any drawer or pile of papers — here are ways to find it.

What good is life insurance if the beneficiaries don’t know about it or aren’t able to find the policy after the policy holder passes? When the beneficiaries do not know the company that wrote the policy, they need to track down the necessary information so they can contact the company and have the policy paid out.

Contact Employers - Ask employers if a life insurance policy was provided through work.

Check with banks - An executor can inquire if the deceased had safety deposit boxes. If so, check the boxes for life insurance policies.

Check the MIB Group - Since 1995, the MIB group has maintained a registry of people who have applied for life insurance policies. While that does not mean that any policies were purchased, it is a good place to start looking.